SS3.  3 ^ 


ouam^- 


; v ILLINOIS  GEOLGGiCAts 

SURVEY  UDR^RY 
MAR  184976 

A STATEMENT  of  FACTS 


CONCERNING 

CONDITIONS  in  the  BITUMINOUS 
COAL  INDUSTRY 

■r  . ' ' r*  • - \ " . V . • ./  ' > • •=•  - V.  — •"  , . 


IN  THE 

STATES  OF  ILLINOIS  AND  INDIANA 


4 . I 


ISSUED  DECEMBER  1,  1914 


PREFACE. 


This  statement  was  prepared  by  a committee  of 
operators  from  Illinois  and  Indiana  and  authorized  by 
the  Illinois  Coal  Operators  Association  and  the  Indiana 
Bituminous  Coal  Operators  Association  for  the  purpose 
of  presentation  to  the  President  of  the  United  States  for 
his  consideration  in  connection  with  the  appointment  of 
the  Federal  Trades  Commission. 

Requests  for  copies  of  this  pamphlet  will  be  welcome 
from  all  those  desiring  to  place  it  in  the  hands  of  their 
representatives  or  friends. 

Copies  furnished  or  sent  direct  to  lists  upon  applica- 
tion to  either  the  Indiana  Association,  Terre  Haute, 
Indiana,  or  the  Illinois  Association,  Springfield,  Illinois. 

(Second  Edition.) 

January  7,  1915. 


Digitized  by  the  Internet  Archive 
in  2017  with  funding  from 

University  of  Illinois  Urbana-Champaign  Alternates 


https://archive.org/details/statementoffactsOOilli 


Introductory. 


The  coal  operators  of  the  States  of  Indiana  and  Illi- 
nois present  to  the  American  nation  some  facts  about 
the  condition  of  their  business.  The  normal  state  of 
this  industry  for  some  years  has  been  such  as  to  endan- 
ger the  lives  of  the  miners,  waste  the  coal  reserve  which 
now  insures  the  safety  of  the  eastern  part  of  the  country 
and  deprive  these  operators  of  any  hope  of  profit.  The 
recent  general  business  depression  has  caused  an  in- 
tense exaggeration  of  this  dangerous  condition.  The 
near  future  contains  nothing  but  disaster  unless  some  re- 
lief is  extended.  What  follows  summarizes  the  facts. 

This  coal  sells  in  a market  embracing  eighteen  states. 
The  business  is  therefore  interstate.  For  that  reason, 
these  operators  are  amenable  to  the  anti-trust,  laws 
which,  they  believe,  forbid  any  cooperation  among  them. 
Because  they  cannot  cooperate,  they  cannot  simplify 
their  selling  methods  or  reduce  their  selling  and  oper- 
ating costs. 

Their  mines  are  within  these  two  states  and  cannot 
be  removed  therefrom.  The  states,  therefore,  regulate 
their  operating  methods. 

The  effect  of  the  nation’s  anti-trust  laws  is  to  cause 
them  to  compete  without  restraint.  This  unrestrained 
competition  has  yielded  a decreasing  selling  price.  The 
states’  laws,  which  were  enacted  to  assure  the  safety  and 
the  social  welfare  of  the  miners,  have  resulted  in  a ris- 
ing production  cost.  The  effects  of  these  two  sets  of 
laws  have  moved  in  opposite  directions.  The  rising  cost 
of  production  and  the  falling  selling  price  have  long 


2 


since  made  profit  impossible  and  now  threaten  the  safety 
of  the  whole  business  structure  as  well  as  of  the  miners 
and  the  public. 

One  of  the  refinements  of  competition  in  which  these 
operators  have  indulged,  has  been  the  erection  of  elabo- 
rate plants  with  which  to  prepare  and  clean  carefully 
nine  standard  sizes  of  coal.  In  obedience  to  the  states’ 
laws,  they  have  fireproofed  their  mines  and  have  added 
expensive  safety  appliances.  These  things  have  en- 
larged the  requisite  investment  in  plant  and  equipment 
by  1,000  per  cent,  in  the  last  twenty  years. 

Another  effect  of  enforced  competition  has  been  in- 
tense individualism.  In  consequence,  they  have  opened 
three  mines  where  only  two  were  needed ; they  have  em- 
ployed three  men  where  only  two  were  necessary.  These 
mines  and  men  can  find  productive  work  only  during 
175  instead  of  a possible  300  days  in  a year. 

Because  they  can  give  to  their  miners  work  but  part 
of  the  time,  these  operators  must  pay  higher  daily  wages 
than  are  warranted  by  the  current  selling  prices.  Their 
labor  cost  is  92.44  cents  per  ton  whereas  the  selling 
price  is  but  $1.14  and  $1.11  respectively  for  Illinois  and 
Indiana. 

From  the  resulting  narrow  margin,  these  operators 
must  pay : Administrative  salaries  and  expenses ; selling 
cost;  royalty  or  land  depletion  charge;  depreciation  on 
plant  and  equipment;  the  cost  of  all  materials  used  in 
the  mines  and  some  eight  or  ten  other  major  items  of 
expense.  The  margin  is,  clearly,  wiped  out  by  these 
items  of  expense  leaving  the  business  with  no  possible 
net  revenue.  Still,  these  operators  are  morally  or  legally 
obligated  to  pay  the  cost  of  any  great  or  dire  emergen- 
cies ; to  educate  their  miners  in  ways  of  assuring  greater 
safety;  to  educate  the  users  in  methods  by  which  coal 
can  be  burned  with  greater  efficiency;  to  expand  their 


3 


sales  into  the  foreign  markets;  to  experiment  with  and 
undertake  the  manufacture  of  by-products  and  to  do 
those  hundreds  of  little  things  which  make  for  greater 
safety  and  for  true  conservation. 

One  obligation  resting  upon  these  operators  is  to  re- 
cover the  pillar  and  top  coal  that  the  country’s  loss  may 
be  lessened.  Because  this  involves  an  additional  ex- 
pense, it  cannot  be  undertaken.  Still,  for  every  two  acres 
of  coal  land  which  they  exhaust,  they  leave  one  acre  of 
coal  unrecovered  and  unrecoverable  in  the  ground.  This 
means  that  in  Illinois,  each  year,  there  is  exhausted  12,- 
000  acres  of  coal  land  whereas  the  exhaustion  should  be 
but  8,000  acres.  In  Indiana,  there  is  exhausted  each  year, 
3,000  acres  whereas  there  should  be  exhausted  but  2,000 
acres.  In  the  nation  there  is  exhausted  each  year  100,- 
000  acres  whereas  the  exhaustion  should  be  but  65,000 
or  70,000  acres.  It  is  significant,  here,  that  these  are 
two  of  the  five  states  which  produce  more  than  80  per 
cent,  of  the  coal  consumed  in  America.  This  means  to 
say  that  this  alarming  waste  is  taking  place  next  door 
to  the  centers  of  greatest  density  of  population.  It  is 
endangering  the  near  future  of  the  very  heart  of  this 
nation. 

These  operators,  caught  between  the  conflicting  regu- 
lations of  the  states  and  the  nation,  yet  under  compul- 
sion to  obey  both,  are  powerless  to  prevent  this  waste. 
Only  the  nation  can  reverse  this  tendency  and  provide 
against  it.  This  statement  is  made  in  the  hope  that 
some  suggestion  will  be  made  which  will  bring  the  relief 
needed. 


4 


A Statement  of  Fact. 

It  has  been  said  that  the  normal  condition  of  the  coal 
mining  industry  is  one  of  dangerous  financial  exhaustion. 
Since  the  end  of  the  depression  in  1897,  the  farms  and 
factories  have  enjoyed  increasing  prosperity.  This  has 
not  been  shared,  at  any  time  or  in  any  degree,  by  the 
coal  industry.  Regardless  of  the  regular  and  substan- 
tial annual  increase  in  tonnage  produced,  the  returns 
from  investments  in  the  coal  trade  have  been  steadily 
diminishing.  Coal  has  supplied  the  power  which  made 
every  business  rich,  yet  the  author  of  all  this  wealth  re- 
mains poor. 

In  the  last  dozen  years,  in  fact,  there  have  been  but  a 
few  brief  periods  in  which  the  coal  trade  has  enjoyed  any 
prosperity.  These  prevailed  in  each  instance  for  not  to 
exceed  two  or  three  months.  They  were  due  to  wholly  un- 
natural causes,  and  in  no  manner  indicated  that  the  busi- 
ness had,  at  last,  become  master  in  its  own  house.  For 
example,  these  operators  got  remunerative  prices  dur- 
ing the  anthracite  strike  of  1902  when  they  profited  by 
the  misfortunes  of  others.  For  very  short  periods  of 
car  shortage  in  the  winters  of  1903  and  1904,  this  experi- 
ence was  duplicated.  Once  or  twice  since  that  time, 
strikes  or  other  temporary  labor  difficulties  in  one  state 
gave  the  other  states  business,  to  which  they  had  no 
natural  right.  Except  in  such  times,  the  trade  has  been 
unprofitable  or  actually  showed  a loss. 

Meanwhile  there  has  been  a steady  increase  in  oper- 
ating and  administrative  expense  due: 

1.  To  repeated  advances  in  labor  cost. 

2.  To  the  increased  cost  of  material,  such  as  rails, 
timber  and  cement,  and  machinery. 

3.  To  the  passage  of  laws  in  behalf  of  the  workers 


5 


such  as  the  safety  measures  and  the  Workmen’s  Com- 
pensation Act  in  Illinois. 

4.  To  the  increased  cost  of  making  sales,  arising  from 
unrestricted  competition. 

The  Cost  of  Production. 

According  to  the  figures  compiled  by  the  Bureau  of 
the  Census,  the  amount  paid  in  wages  was,  in  1909,  above 
80  per  cent,  of  the  total  selling  value  of  coal  at  the  mine 
mouth.  Since  1909  there  have  been  granted  two  wage  in- 
creases— one  in  1910  (5.55  per  cent.)  and  another  in 
1912  (5.26  per  cent.).  These  increases  have  brought 
the  wage  cost  per  ton  of  coal  produced  to  92.44  cents  in 
1913. 

In  1913,  the  average  selling  price  of  coal  at  the  mines 
in  Illinois,  was  $1.14  and  in  Indiana  $1.11  per  ton.  This 
leaves  only  21.6  cents  in  Illinois  and  18.6  cents  in  Indi- 
ana available,  out  of  which  must  be  paid: 

The  cost  of  material  used  at  the  mines; 

The  cost  of  making  sales; 

All  officers’  salaries; 

General  expenses; 

Insurance  (liability,  fire,  storm,  etc.) ; 

Taxes  (including  tax  on  plant  and  mineral  rights) ; 

Interest  on  the  investment; 

Depreciation  of  plant; 

Royalties  or  charges  for  the  exhaustion  of  coal. 

The  last  report  of  the  Bureau  of  the  Census  (1909) 
showed  that  without  allowing  for  any  interest  charge  on 
the  investment  or  for  amortization  of  property,  the  so- 
called  net  returns  in  Illinois  and  Indiana  were  only  3 
cents  per  ton  in  Illinois  and  less  than  1 cent  per  ton  in 
Indiana. 

The  average  royalty  paid  however  in  these  two  states 


6 


on  coal  recovered  under  lease  is  5 cents  per  ton  and  the 
average  present  valuation  of  coal  land  is  such  as  to  re- 
quire a very  minimum  amortization  charge  of  3 cents 
per  ton  to  recover  such  land  value  within  the  period  of 
the  mine’s  life. 

It  will  therefore  be  seen  that  in  even  so  good  a year 
as  1913  an  actual  profit  return  was  impossible  but  to 
the  contrary  and  as  existing  facts  show  developed  a sub- 
stantial deficit  for  the  industry  in  these  two  states. 

A considerable  addition  to  the  cost  of  production  is 
made  by  the  idle  time  of  the  mines,  during  which  all 
overhead  and  some  labor  costs  must  be  paid.  The  aver- 
age number  of  productive  days  wTorked  per  annum  in 
these  two  states  is  only  about  175  out  of  a possible  300 
or  more.  This  idle  time  of  the  miners  is  not  confined  to 
one  season  or  period  during  which  they  can  find  em- 
ployment elsewhere.  To  the  contrary,  the  men  are  al- 
ways subject  to  call,  for  which  reason  they  urge  a greater 
daily  wage  that  their  annual  income  may  be  sufficient  for 
their  needs.  This  causes  these  operators  to  grant  abnor- 
mal wage  advances,  which  are  directly  reflected  in  coal 
cost. 

Many  industrial  plants  which  produce  standard  or 
basic  commodities  find  it  possible  to  operate  24  hours  per 
day  by  using  different  shifts  of  men.  They  work  thus 
for  310  or  more  days  a year  or  a total  of  7,440  hours  per 
year. 

Still  other  industries,  on  two  8 or  10  hour  shifts,  per 
24  hours — 300  to  310  days  per  year — operate  5,000  to 
6,000  hours  per  annum. 

Even  one  8 hour  shift  in  each  24  hour  period — 310 
days  per  year — gives  2,480  working  hours  per  annum. 
These  mine  operators,  because  under  unrestricted  com- 
petition they  built  more  plants  than  are  needed,  can  only 
operate  for  8 hours  out  of  every  24,  and  for  175  days  per 
year,  or  1,400  hours. 


7 


It  will  be  seen,  therefore,  that  as  against  100  per  cent, 
plant  utilization  (24  hours,  310  days — 7,440  hours  per 
annum)  possible  to  some  industries  and  as  against  an 
average  by  all  industries  of  33  per  cent,  to  45  per  cent, 
(one  8 or  10  shift  per  24  hour  period — 310  days),  a 
coal  plant  is  in  actual  productive  use  only  about  18  per 
cent,  of  the  time.  This  makes  plant,  interest  and  depreci- 
ation charges  six  times  heavier  than  for  other  indus- 
tries. 

In  addition  to  ruining  the  operators,  this  distresses 
the  miners.  For  example,  the  97,000  miners  of  Illinois 
and  Indiana  who  are  prevented  from  working  125  days 
per  year,  might  at  the  present  wage,  have  earned  an  ad- 
ditional $36,400,000  or  $371  per  man  per  year,  had  their 
employers  been  able  to  give  them  work  or  had  their  ef- 
forts been  expended  in  other  directions. 

The  present  markets  for  Illinois  and  Indiana  coal  can 
be  supplied  by  60  per  cent,  of  the  mines  now  being  oper- 
ated. The  interest  on  the  surplus  capital  invested  in 
these  unnecessary  mines  adds  to  the  cost  of  production 
in  each. 

(For  concurring  opinion  of  labor  on  these  points  these 
operators  refer  to  the  appendix  which  contains  certain 
testimony  given  at  a hearing  in  Chicago  the  latter  part 
of  July,  1914,  before  the  United  States  Commission  on 
Industrial  Relations,  by  Duncan  McDonald,  Secretary- 
Treasurer  of  the  United  Mine  Workers  in  Illinois.) 

The  Consequences  of  This  Waste. 

Having  shown  the  cost  of  mining  coal  and  having 
measured  it  alongside  the  revenue  from  the  sale,  it  re- 
mains to  measure  the  consequences. 

In  Bulletin  47  of  the  United  States  Bureau  of  Mines, 
Dr.  J.  A.  Holmes,  Director  of  the  Bureau  states: 

“ During  the  past  year  (1911)  in  producing  500,- 
000,000  tons  of  coal  we  wasted  or  left  underground 


8 


in  such  a condition  that  it  will  probably  not  be  re- 
covered in  the  future,  250,000,000  tons  of  coal.  In 
a higher  way,  our  mineral  resources  should  be  re- 
garded as  property  to  be  held  in  trust  with  regard  to 
both  the  present  and  future  needs  of  the  country. 
Neither  human  labor  nor  human  agency  has  con- 
tributed to  their  intrinsic  value  and  whatever  rights 
the  individual  may  possess  have  been  derived  from 
the  general  government.  The  government  does  not 
surrender  its  right,  and  should  not  neglect  its  duty 
to  safeguard  the  welfare  of  its  future  citizens  by 
preventing  the  waste  of  these  resources.’ ’ 

It  is  customary  to  say  that  the  mining  of  coal  is  an 
extractive  industry.  The  phraseology  is  too  weak;  it 
must  be  considered  as  a destructive  industry.  That  is 
to  say,  each  ton  of  coal  removed  destroys  by  just  that 
much  the  value  of  the  plant  engaged  in  producing  it. 
Also,  it  destroys  by  that  much  the  country’s  coal  re- 
serve. Coal  once  mined  or  lost  can  never  be  replaced. 
With  the  life  cycle  of  several  large  coal  deposits  well  de- 
fined and  with  the  end  not  extremely  remote,  the  deliber- 
ate waste  of  coal  by  mining  methods  now  in  use  consti- 
tutes an  immediate  menace.  However  when  these  oper- 
ators have  no  margin  above  cost  under  the  best  market 
conditions  and  when  working  only  the  choicest  areas, 
the  removal  of  thinner  or  inferior  parts  at  a much  higher 
cost  per  ton  is  out  of  question.  This  will  be  explained 
briefly. 

The  major  portion  of  the  thick-seam  coal  in  Illinois 
and  Indiana  is  recovered  by  the  so-called  room  and  pillar 
plan,  the  work  advancing  toward  the  boundaries  of  the 
controlled  area  from  the  shaft  -bottom.  By  such  method 
pillars  of  coal,  of  sufficient  size  to  sustain  the  overlying 
weight,  are  left  standing  25  to  40  feet  apart.’  Also  all 
coal  above  certain  well  defined  lines  of  parting  in  the 
seam  are  left  up  to  protect  a roof  until  the  boundaries 
of  the  acreage  have  been  reached. 


9 


These  pillars  and  the  so-called  top  coal  are  supposed 
to  be  recovered  as  the  work  is  carried  hack  to  the  bot- 
tom of  the  shaft.  In  actual  practice,  however,  this  is 
seldom  or  never  done.  Thus  the  actual  coal  recovery 
from  any  given  acreage  seldom  exceeds  50  per  cent,  of 
the  total  amount  in  the  seam  out  of  a possible  90-95  per 
cent,  available  by  proper  mining  practice.  This  is  true 
for  this  reason.  As  the  distance  from  the  shaft  increases, 
the  expense  of  haulage  and  road  maintenance  increases. 
Also  the  hazard  from  gas  and  loss  from  mine  falls  in- 
crease. Likewise,  in  working  backward  to  the  shaft  the 
quality  of  the  coal  secured  is  impaired  by  reason  of 
contamination  with  accumulated  refuse  of  earlier  work. 
Therefore,  all  these  valuable  areas  are  simply  abandoned, 
because  the  operator  cannot  afford  to  pay  the  extra  cost 
of  reclaiming  this  coal. 

It  also  occurs  at  various  places  that  substantial  bodies 
of  coal  lie  between  the  boundary  lines  of  two  approxi- 
mately adjoining  mines.  The  extra  haulage  cost  to 
either  shaft,  for  the  removal  of  this  intermediate  coal 
(although  only  a few  cents),  cannot  be  borne  without 
operating  loss.  Such  areas  are  therefore  entirely  neg- 
lected and  cannot  later  be  recovered  because  the  amount 
of  coal  available  would  not  justify  the  development  of 
a new  mine  to  reach  them. 

Although  not  strictly  germane  to  the  subject  in  hand, 
mineral  land  taxation  arises  as  an  indirect  causative 
factor  of  waste.  Many  operating  companies  hesitate  to 
secure  as  large  areas  as  might  be  economically  available 
to  their  shafts  because  they  wish  to  avoid  tax  payment 
through  a long  period  of  years  on  a valuation  of  coal 
rights  which  is  unwarranted.  They  prefer  to  let  title 
to  such  additional  acreage  rest  with  the  farmer  or  other 
owner  who  uses  only  the  surface  and  who,  while  so  using 
it,  does  not  pay  any  tax  on  the  underlying  coal.  Later, 


10 


it  frequently  occurs  tliat  such  original  owner,  with  an 
unreasonable  notion  of  the  value  of  his  coal  rights, 
makes  purchase  impossible  through  demand  for  exces- 
sive price.  This  coal  also  is  abandoned  along  with  the 
adjoining  worked-out  area. 

This  waste  of  coal  should  concern  the  Eastern  and 
Central  states  sufficiently  to  cause  some  relief  to  be  ex- 
tended to  these  operators.  It  is  to  the  country’s  interest 
to  see  that  these  operators  get  enough  money  to  make 
this  recovery  reasonably  complete. 

Social  Consequences  of  Loss. 

Aside  from  the  economic  waste  mentioned  herein,  the 
loss  of  revenue  has  serious  social  consequences. 

The  continuous  and  prolonged  lack  of  any  profit  in  the 
coal  industry,  makes  it  impossible  for  these  operators  to 
furnish,  in  all  instances,  the  necessary  safeguards  to 
make  mining  even  a relatively  safe  occupation. 

It  has  also  occasioned  the  rejection  by  many  of  the 
provisions  of  the  Illinois  Workmen’s  Compensation  Act. 
That  is  to  say,  coal  companies  without  current  net  earn- 
ings or  any  sort  of  reserve  resources  are  not  willing  to  as- 
sume such  additional  definite  obligations  as  the  law  pro- 
poses ; to  make  provision  for  the  injured  workman  and  his 
family  or  even  to  obligate  themselves  to  make  incidental 
payments  of  any  kind.  Necessity  compels  them  to  rest 
their  hope  on  the  throw  of  chance  in  a judicial  hearing. 
They  rely  on  a court’s  decree  to  leave  them  something  of 
their  capital,  whereas  if  they  worked  under  this  law  they 
might  as  well  have  no  capital  for  all  the  return  they  can 
hope  to  get  upon  it. 

For  this  reason,  the  anticipated  value  and  beneficent 
purpose  of  such  legislation  is  clearly  nullified.  And  until, 
by  common  consent,  the  conditions  detailed  in  this  state- 
ment of  fact  have  been  ameliorated,  further  effort  taking 


the  form  of  additional  legislation,  however  worthy,  ra- 
tional or  desirable  will  prove  similarly  abortive  and  fu- 
tile. 


Coal  and  Regulation  of  Business. 

For  a part  of  the  present  disastrous  condition  of  their 
industry  the  coal  operators  are,  perhaps,  themselves 
responsible.  They  have  not  organized  their  business  as 
many  other  industries  have  done.  However,  with  the 
very  stringent  anti-trust  laws  of  the  states  and  the  Sher- 
man Act  confronting  them,  much  uncertainty  has  ex- 
isted and  still  exists  as  to  what  the  various  laws  permit. 
Because  of  this  uncertainty  no  concerted  action  has  been 
taken.  During  the  period  of  waiting  for  some  new 
light  on  the  laws,  many  operators  have  hoped  that  some 
solution  would  come  and  that  they  might  survive  until 
the  dawn  while  competitors  would  fail. 

They  have  been  discouraged  by  the  severity  of  judicial 
rebuke  which  has,  throughout  the  last  several  years,  fol- 
lowed many  community  efforts  in  other  industries. 
These  operators  have,  therefore,  done  nothing,  but  are 
now  prepared  to  defend  their  claim  to  just  considera- 
tion and  a fair  return.  They  do  this  not  alone  for  selfish 
reasons  but  because  they  want  to  make  appropriate  pro- 
visions for  conserving  natural  resources,  and  to  grant 
their  workers  physical  and  social  comforts  beyond  those 
now  possible. 

The  recent  passage  of  certain  acts,  which  may  with 
propriety  be  called  enabling  laws,  encourages  these  oper- 
ators to  believe  that  public  sentiment  has  so  changed  that 
a possible  opportunity  to  secure  relief  presents  itself. 
They,  therefore,  submit  this  statement. 

Their  hope  is  that  the  Trades  Commission  may  be  the 
governmental  means  through  which  the  nation  will  ulti- 
mately be  thoroughly  enlightened  regarding  the  abso* 


12 


lute  equities  of  their  industry.  They  further  believe 
that,  on  account  of  its  extent  and  importance,  they  are 
warranted  in  urging  as  a first  consideration  that  one  of 
the  members  of  this  Trades  Commission  shall  be  a capa- 
ble, experienced  man,  who  is  familiar  with  mining  condi- 
tions and  requirements,  is  acceptable  to  the  coal  industry 
and  who  can  bring  to  the  Commission  sound  judgment  on 
all  matters  affecting  these  interests. 

They  also  hope  that  through  the  agency  of  this  Com- 
mission, or  upon  the  sanctioned  initiative  of  the  operators 
themselves,  the  apparently  necessary  remedy  for  pres- 
ent conditions  may  be  immediately  applied,  such  remedial 
plan  to  be  subject  to  a later  determination  by  the  Federal 
Government,  working  through  an  appropriate  agency,  as 
to  its  propriety. 

There  is  no  desire  now  or  hereafter  to  establish  a 
coal  monopoly.  Much  less  is  there  a desire  among  these 
operators  to  extort  unreasonable  profits.  But  they  con- 
sider it  vitally  essential  to  stapelize  the  industry  for  the 
benefit  alike  of  the  workmen,  the  consumers  and  invest- 
ors. It  is,  they  believe,  reasonable  to  assume  that  as 
long  as  the  Government  sustains  and  encourages  the 
principle  of  collective  action — as  evidenced  by  the  ex- 
emption of  labor  unions  from  anti-trust  measures — it 
would  also  sanction  a plan  enabling  coal  operators  to 
cooperate  in  a similarly  legitimate  way,  particularly  if 
appropriate  and  definite  governmental  control  were  in- 
cluded to  the  extent,  at  least,  of  permitting  all  of  such 
activities  to  be  known  to  the  public  and  provided  that 
sufficient  and  ample  penalties  be  provided  and  im- 
posed for  the  violation  of  all  such  rules,  agreements  or 
laws  as  may  be  devised  to  regulate  such  collective  ac- 
tions. 

Coal  operators  would  not  object  to,  but,  on  the  con- 
trary, would  invite  such  publicity  and  supervision. 


13 


This  suggestion  is  particularly  pertinent  for  this  rea- 
son. On  every  hand  these  coal  operators  are  confronted 
by  combined  purchasing  agencies  to  which  they  sell  their 
coal  and  by  combined  workmen  from  whom  they  buy 
their  labor.  Thus  situated,  these  operators  are  obviously 
at  a disadvantage  when,  disorganized  as  herein  stated, 
both  their  buying  and  their  selling  are  done  with  col- 
lective or  cooperating  units. 

Other  industries  enjoy  a degree  of  encouragement  and 
protection  by  the  Government  which  is  denied  the  coal 
mining  industry.  In  volume  of  business,  mining  is  ap- 
proximately one-half  that  of  agriculture;  these  major  in- 
dustries are  alike  in  that  both  work  the  land  in  recover- 
ing vital  necessities  for  the  public  use,  yet,  regardless  of 
the  fact  that  the  exhaustion  of  the  mineral  deposits  is 
irremediable,  while  the  loss  of  soil  fertility  and  produc- 
tiveness can  be  overcome,  the  United  States  spends  only 
one-twenty-fourth  as  much  to  promote  the  mining  indus- 
try as  to  help  agriculture.  Intimately  affecting,  as  it 
does,  the  lives  and  welfare  of  all  our  citizens,  the  coal 
industry  deserves  and  should  receive  at  the  hands  of 
our  law  makers,  attention  proportionate  to  its  import- 
ance. 

The  publications  of  the  United  States  Geological  Sur- 
vey and  the  Bureau  of  Mines,  while  helpful  in  the  physi- 
cal operation  of  properties,  do  not  contain  statistics 
such  as  are  furnished  by  the  Agricultural  Department 
dealing  with  costs,  values  and  distribution.  The  appro- 
priations are  entirely  too  small. 

When  the  Southern  cotton  growers  suddenly  found 
their  market  demoralized  by  the  European  war,  prompt 
investigations  were  made  and  assistance  rendered. 
Whatever  the  major  sentiment  or  opinion  may  be  with 
reference  to  the  propriety  and  warrant  of  such  help 
so  extended,  the  fact  remains  that  however  bad  and  un- 


14 


fortunate  this  situation  may  be,  it  is  still  not  so  serious 
(except  perhaps  as  to  the  number  of  persons  immediately 
involved)  as  the  present  coal  producing  situation.  Nor 
is  it  as  threatening  to . the  general  welfare.  For,  even 
though  all  the  present  cotton  crop  be  lost  and  return  no 
value  whatever,  the  land  remains  and  later  crops  are 
possible.  With  coal  removal  or  waste,  the  land  is  ex- 
hausted of  such  value  permanently,  and  the  serviceabil- 
ity and  use  of  a coal  mining  plant  is  not,  as  with  the  land, 
perennial. 

Co-operation  would  not  only  greatly  benefit  the  work- 
men and  investors  in  the  coal  business,  but  would  en- 
courage the  establishment  of  other  industries  now  sorely 
needed  in  this  country. 

For  example,  the  necessity  for  the  establishment  of 
by-products  and  coking  plants  is  very  evident.  The  utili- 
zation of  sulphate  of  ammonia  for  fertilizer,  creosote 
oil  for  timber  treatment,  the  products  of  coal  tar  for  in- 
dustrial and  pharmaceutical  purposes  is  too  well  known  to 
require  further  reference.  Over  $12,000,000  wTere  paid 
last  year  for  coal  tar  products  imported  from  abroad. 
Of  the  95,000,000  gallons  of  creosote  oil  consumed  in  the 
treatment  of  ties  and  timber,  60,000,000  gallons  were  im- 
ported. Of  the  44,000,000  tons  of  coke  manufactured  in 
the  United  States  in  1912,  33,000,000  tons  were  made  in 
bee-hive  ovens  and  the  waste  in  smoke  was  over  $50,- 
000,000. 

It  is  only  through  co-operation  that  the  coal  operators 
can  get  together  the  money  needed  to  establish  the  coking 
and  by-product  industry  on  a proper  basis  in  this  coun- 
try. That  is  to  say,  the  coal  man  is  the  proper  producer 
of  these  by-products  but  he  cannot  do  so  because  he  has 
not  the  capital  and  cannot  get  it  because  his  business  is 
so  disorganized  he  has  no  longer  any  credit. 


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16 


Figure  1 — The  top  line  shows  the  production  of  the  Westfalia  syndi- 
cate from  1894  to  1912.  The  bottom  line  shows  that  of  Illinois  and 
Indiana  combined.  The  rate  of  increase  is  almost  identical. 


17 


APPENDIX. 


A Lesson  From  Germany. 

In  the  commerce  of  the  world,  the  United  States  has 
established  itself  in  a manner  unparalleled  by  any  other 
nation.  However,  in  gaining  our  supremacy  we  have  not 
found  it  necessary  to  economize  our  resources  but  have 
ruthlessly  destroyed  the  heritage  belonging  to  ourselves 
and  our  children:  If  we  are  to  keep  our  place  in  the 
commercial  world  we  must  learn  the  lesson  of  economy 
and  we  need  offer  no  apology  if  we  propose  to  learn 
this  lesson  in  part  from  those  old  world  nations  which 
have  been  forced  by  stern  necessity  to  conserve  every 
resource  in  order  to  support  their  dense  populations. 
One  notable  example  is  the  Westfalia  Syndicate  of  Ger- 
many and  it  is  especially  a case  in  point,  because,  at  the 
time  of  the  organization  of  the  syndicate,  the  circum- 
stances were  similar  to  those  existing  in  America  at  pres- 
ent. It  is  possible,  therefore,  that  we  may  profit  by  a 
study  of  their  experience  which  has  solved  the  problem 
for  them  after  they  had  endured  a most  disastrous  and 
trying  period  extending  over  30  years. 

As  early  as  1850  the  mine  operators  of  the  Westfalia 
District  suffered  from  severe  competition  due  to  over- 
production, and  various  efforts  were  made  to  find  relief 
Price  agreements,  which  are  not  forbidden  by  the  Ger^ 
man  law,  were  disregarded,  notwithstanding  the  very 
heavy  penalties  imposed  for  violations.  Finally  in  1885 
the  Westfalia  Syndicate  was  established  and  continues 
to  date.  It  is  a selling  organization  without  any  prop- 
erties and  only  a very  nominal  working  capital.  Its  af- 
fairs are  administered  by  an  official  who  has  no  financial 
interest  in  the  mines  and  acts  as  chairman  of  a board 


18 


Figure  2 — This  shows  the  average  selling  price  of  coal  at  the  pit  mouth 
from  1894  to  1912.  The  Westfalia  increase  was  75  cents  a ton ; that  in 
Indiana  and  Illinois  was  30  cents  a ton. 


19 


made  up  of  one  representative  from  eacli  participating 
company.  The  function  of  the  Syndicate  is  to  sell  the 
product  of  the  mines,  coke  ovens  and  briquetting  plants, 
and  to  allot  to  each  company  the  tonnage  which  it  should 
produce.  Twice  each  year  an  estimate  of  the  probable 
requirements  is  made,  and  the  tonnage  is  allotted  to  each 
company  based  upon  previous  production  after  making 
allowance  for  tonnage  to  companies  consuming  a part  of 
their  own  production,  such  as  railways,  furnaces,  etc. 
On  the  first  of  May  each  company  is  notified  how  much 
coal  it  will  be  called  upon  to  furnish  during  the  second 
half  of  the  calendar  year,  and  each  mine  can  make  its 
arrangement  for  the  most  economical  production  of  the 
tonnage  called  for.  Any  company  falling  short  in  its 
supply,  if  market  conditions  continue  as  anticipated, 
must  pay  damages  for  the  shortage,  unless  the  deficit 
can  be  made  up  by  another  company.  Losses  due  to  in- 
ferior preparation  are  borne  by  the  company  responsible 
for  the  same.  Prices  are  agreed  upon  and  fixed  in  ad- 
vance semi-annually  and  take  into  account  the  quality  of 
coal  produced  from  each  mine,  making  it  immaterial  to 
the  purchaser  where  the  coal  comes  from,  because  of  the 
adjustment  of  price  to  the  intrinsic  value  of  the  material 
sold. 

It  has  happened  that  by  some  unforseen  condition,  the 
Syndicate  was  not  able  to  market  through  its  ordinary 
trade  channels  the  estimated  quantities  of  coal  and  other 
markets  had  to  be  entered  in  order  to  permit  the  mines 
to  operate  under  the  most  economical  conditions.  Losses 
due  to  these  conditions  are  borne  alike  by  all,  the  Syndi- 
cate paying  to  the  participants  the  price  agreed  upon, 
having  retained  a commission,  from  which  all  deficits 
are  paid.  The  advantages  of  a single  seller  marketing 
50,000,000  tons  of  coal  a year  are  apparent.  Markets 
are  available  to  the  Syndicate  which  individual  operators 


20 


Figure  3 — This  shows  how  revenue  from  coal  sale  is  distributed  in 
Westfalia  and  in  Indiana  and  Illinois.  Although  the  wage  rate  there 
is  much  lower,  the  amount  paid  by  Westfalia  for  wages  exceeds  the 
gross  revenue  of  these  Illinois  and  Indiana  operators. 


21 


could  not  reach.  The  Syndicate  contracts  are  made  for 
five-year  periods,  which  assures  an  income  to  the  oper- 
ators and  enables  them  to  finance  their  properties  and 
engage  in  business  more  remunerative  but  requiring 
large  investments,  such  as  the  coking,  by-product  and 
briquetting  plants.  Such  financing  would  be  impossible 
with  the  uncertainties  of  ordinary  competition.  The 
higher  returns  have  enabled  the  expenditure  of  money 
for  improved  equipment,  safety  measures,  and  installa- 
tion of  labor  saving  devices  quite  unknown  in  this  coun- 
try. Complete  extraction  of  coal  is  required  by  the  Gov- 
ernment, and  it  is  estimated  that  the  cost  of  flushing  to 
sustain  overlying  stratas  and  permit  removal  of  all  coal 
adds  25  cents  per  ton  to  the  production  cost. 

The  coal  operators  are  enabled  to  provide  funds  for 
the  protection  of  the  injured  and  killed  employes  and 
their  families,  provide  pensions  for  the  incapacitated  and 
aged  employes.  The  cost  of  this  social  insurance  in  1909 
was  20  cents  per  ton  of  the  production. 

The  higher  coal  prices  which  followed  the  establish- 
ment of  the  Syndicate  have  not  been  protested  by  the 
coal  consumer.  It  has  been  generally  accepted  as  the  best 
expedient  in  solving  a most  vexatious  question.  Un- 
doubtedly more  care  and  economy  in  the  use  of  coal  re- 
sulted by  the  adoption  of  more  economical  engines  and 
improved  boiler  settings. 

The  Westfalia  production  increased  from  1,665,000  in 
1850  to  81,000,000  tons  in  1907;  at  the  same  time  the 
number  of  companies  was  reduced  from  100  to  76,  indi- 
cating growth  of  individual  companies  and  concentra- 
tion of  capital.  The  17  companies  in  the  Syndicate  whose 
output  was  sold  for  commercial  use  and  who  were  not 
allied  with  fuel  consuming  industries  had  an  aggregate 
annual  production  of  28,000,000  tons  and  a capitalization 
of  $72,450,000  which  is  an  average  of  $4,200,000  each. 


7a£2e 


22 


Figure  4 — This  shows  the  number  of  shifts  worked  by  Westfalia  and 
Illinois  and  Indiana  from  1894  to  1912.  Westfalia  made  an  average  of 
about  300  days  a year.  Illinois  and  Indiana  made  less  than  200  days. 


23 


Figure  5 — The  bottom  line  shows  the  fluctuations  of  the  miners’  earn- 
ings in  Illinois  and  Indiana  from  1894  to  1912.  The  top  line  shows  what 
those  earnings  would  have  been  had  these  miners  been  able  to  work  as 
regularly  as  did  the  Westfalia  miners. 


Tk&Je3 


24 


Figure  6 — This  shows  how  the  revenue  of  the  Westfalia  syndicate  is 
distributed.  No  such  showing  can  be  made  for  Illinois  and  Indiana. 
The  whole  revenue  from  the  sale  of  coal  goes  to  pay  wages  and  to  buy 
material,  etc. 


25 


This  indicates  an  investment  of  $2.50  per  ton  of  annual 
production  in  plant  and  equipment,  only  all  the  coal  be- 
ing owned  by  the  Government. 

For  Illinois  the  capital  investment  in  1909  was  $1.49; 
in  Indiana  $2.44  per  ton  of  annual  production,  which  lat- 
ter however  includes  the  coal  rights,  and  represent  the 
major  portion  of  the  investment. 


26 


A Pertinent  Paraphrase. 

As  a final  thought  on  this  subject,  these  operators  offer 
a paraphrase  of  Commissioner  Daniels’  dissenting  opin- 
ion when  the  Interstate  Commerce  Commission,  on  July 
29th,  1914,  handed  down  its  decision  in  the  “ Eastern 
llailroads  Advance  Eate  Case.”  It  reads  as  follows: 

“The  world-wide  phenomenon  of  rising  prices  is  by 
this  time  no  novelty.  Since  1906  the  average  rise  in  the 
world’s  price  level  is  estimated  by  competent  statisti- 
cians as  from  30  to  50  per  cent.  It  has  mirrored  itself 
in  the  raising  cost  of  living;  it  has  evoked,  and  most 
properly,  advances  in  wages  and  salaries;  it  has  coin- 
cided with  an  increase  in  the  nominal  rate  of  interest 
where  part  of  the  interest  so-called  is  but  compensation 
for  the  anticipated  depreciation  of  the  capital  sum  later 
to  be  repaid. 

“This  rise  in  the  price  level  must  eventually  be  reck- 
oned with  in  railroading  (coal  mining).  For  a time  its 
effects  may  be  masked  by  adventitious  increases  in  the 
volume  of  traffic  (tonnage)  but  this  temporary  relief  in 
its  very  nature  is  uncertain,  and  sooner  or  later  this  dif- 
ficulty is  sure  to  reappear.  For  a time  it  may  be  cir- 
cumvented by  extraordinary  economies,  but  in  its  nature 
it  is  inexorable.  It  must  be  faced,  but  not  trifled  with. 
It  is  hardly  an  adequate  remedy  to  accord  to  carriers 
(coal  producers)  relief  only  when  their  returns  have 
reached  the  well-nigh  desperate  level  now  shown. 

“A  living  wage  is  as  necessary  for  a railroad  (coal  cor- 
poration) as  for  an  individual.  A carrier  (coal  produc- 
ing company)  without  a sufficient  return  to  cover  costs 
and  obtain  in  addition  a margin  of  profit  large  enough 
to  attract  new  capital  for  extensions  and  improvements 
cannot  permanently  render  service  commensurate  with 
the  needs  of  the  public.” 


27 


Concurring  Opinion  of  Labor. 

Excerpts  from  the  testimony  given  July  22nd,  1914* 
by  Mr.  Duncan  McDonald,  Secretary-Treasurer  U.  M. 
W.  of  A.  (District  No.  12 — Illinois.)  See  page  7. 

Mr.  Thompson:  Is  there  any  other  thing  you  would 
like  to  say,  Mr.  McDonald,  now,  with  reference  particu- 
larly to  the  industrial  conditions  existing  in  the  Illinois 
coal  fields,  other  than  what  has  been  said  by  Mr.  Walker 
and  Mr.  Bent? 

Mr.  McDonald:  Well,  the  industrial  conditions  in  Illi- 
nois now  in  the  mining  industry  are  the  worst  that  I 
have  ever  known  in  my  experience.  There  are  more  idle 
men  in  Illinois  this  summer  than  we  ever  had  before. 
Scarce  a day  goes  by,  or  in  fact  every  day  there  are  some 
50,000  out  of  employment  in  Illinois  in  the  mining  in- 
dustry alone.  The  same  men  are  not  idle  every  day. 
They  may  get  a day’s  work  this  week,  and  perhaps  a half 
day’s  work  next  week.  But  as  a general  proposition 
since  the  first  of  April  we  have  had  approximately  40,- 
000  men  idle  all  of  the  time,  and  20,000  others  idle  a 
greater  portion  of  the  time. 

Mr.  Thompson : What  remedy  would  you  suggest  for 
this  last  condition  you  have  spoken  of? 

Mr.  McDonald : I know  of  no  remedy,  except  the  peo- 
ple, or  the  government,  or  the  state — the  public  will  take 
over  the  industry  and  regulate  it  in  such  a manner  that 
we  won’t  have  six  mines  where  there  is  only  business 
for  one. 

At  the  present  time  I know  of  no  law  that  will  prevent 
men  from  investing  their  money  in  mines  and  developing 
them  if  they  see  fit.  We  have  now  several  companies  in 
the  state  who  are  sinking  new  mines,  notwithstanding 
the  fact  that  there  is  no  work  now  for  more  than  a third 


28 


of  the  men,  and  the  equipment  is  either  running  one- 
third  of  the  time,  or  one-third  of  it  is  idle  all  the  time. 

Mr.  Thompson:  Did  you  hear  the  suggestion  of  Mr, 
Bent  with  reference  to  that  subject,  and  how  he  thinks 
it  could  he  handled? 

Mr.  McDonald:  In  reference  to  the  German  law? 

Mr.  Thompson:  The  German  law,  yes,  and  in  fact — 

Mr.  McDonald:  Yes.  I personally  favored  that  be- 
fore the  Efficiency  Commission  in  Springfield  a short 
while  ago.  But  the  fear  I have  is  that  it  requires  so 
much  time  to  put  into  operation  the  law  that  he  suggests 
that  it  is  going  to  be  a long  time  before  we  arrive  at 
results. 

* * * * * 

Mr.  Thompson : Is  there'  anything  further  you  would 
like  to  say  about  the  conditions  in  the  Illinois  coal  fields  ? 

Mr.  McDonald:  I feel  this  way,  that  under  the  pres- 
ent arrangement,  largely  by  reason  of  the  competition  be- 
tween the  companies  in  this  state  and  the  companies  in 
other  states,  there  is  a very  great  waste  in  the  pres- 
ent method  of  producing  coal.  Some  of  the  mines  in  the 
state  are  only  getting  out  approximately  60  per  cent, 
of  the  coal,  where  in  reality  they  should  get  out  at  least 
90  per  cent,  of  the  coal.  . There  is  a great  w~aste  in  the 
resources  of  the  country  in  that  way.  This  is  due,  I 
believe,  in  large  measure  to  competition  and  the  desire 
to  get  profits  as  early  as  possible  after  the  mine  is  sunk, 
and  the  desire  to  get  the  coal  as  cheaply  as  possible,  with- 
out regard  either  to  the  product  or  to  the  welfare  of 
the  miners  employed  in  the  mines. 

***** 


1915 

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